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Gold has seen a ferocious sell-off worth over $15.00 from over $1,250.00 at the beginning of Asia, all the way down to currently test $1,231.00, level where a strong short liquidation originated following the dovish FOMC last week.

The overstretched rise in gold suggests that some sort of correction lower may be in the cards, for the big players to re-engage in long-side business. On the downside, 1,226.00 is next key daily support, ahead of steeper declines towards $1,210.00 and $1,200.00. On the upside, $1,250.00 remain the key level ahead of $1,270.00.

Gold 1230 Still Key to Near Term Upside Potential. Recent gold updates noted that “the October high at 1191 has held as support, which confirms bullish behavior” and that “a triangle has formed over the last few weeks. The breakout objective from that pattern is 1336, which is near the July 2014 high of1345.” t’s a good sign that the recent dip held former resistance near 1230.

Spot gold hit its lowest in a week on Wednesday, with the impact of a stronger dollar outweighing a slight swell in the metal's safe-haven appeal after attacks on an airport and a rush-hour metro train in Brussels.

Spot gold had slipped 1 percent to $1,235.36 an ounce by 0634 GMT. Prices earlier fell to the lowest since March 16 at $1,231.60 as profits were booked ahead of the Easter break which starts on Friday.

"The rally yesterday was partially due to the rally from the Brussels bombing, so after that, the market opened to a flurry of selling from Asia," said a trader in Singapore.

For the second time in as many months one major Dutch bank has increased it forecast for gold. In a report published Tuesday, analysts at ABN Amro increased their year-end target for gold to $1,370 an ounce, up from their previous target of $1,300. For 2017 they see prices ending the year at $1,450 an ounce, up from the initial forecast at $1,300.

They note in the report that a dovish Federal Reserve, a weaker U.S. dollar and negative real interest rates will all be positive for gold this year. “Recently, we revised our overall US dollar outlook.

We now believe that the multi-year US dollar rally has peaked and that it will turn lower,” the say. “Over the recent years, the most dominant driver for gold prices has been the direction of the US dollar. As we are now expecting a lower dollar over the coming years, a crucial headwind is taken away.”

As for the Fed the analysts say that even if the Fed does raise interest rates later this year -- a scenario they see as unlikely -- they will be perceived as being behind the inflation curve.

“This should be positive for gold prices as investors will likely buy gold because of lower US real yields and as some may see gold as a possible inflation hedge. Therefore, gold prices will unlikely suffer next year when we expect gradual Fed rate hikes,” they say.

Reference : FXStreet, DailyFX, Reuters, Kitco